How Dick Portillo built a hot dog stand into an empire

 
 
Updated 7/7/2015 3:21 PM
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  • Dick Portillo, former owner of Portillo's and other restaurants, talks about his rise from owning a small hot dog stand in Villa Park to selling a billion dollar empire to Berkshire Partners.

      Dick Portillo, former owner of Portillo's and other restaurants, talks about his rise from owning a small hot dog stand in Villa Park to selling a billion dollar empire to Berkshire Partners. Daniel White | Staff Photographer

  • Mike Miles, left, of Berkshire Partners, a private equity firm in Boston, was chosen by Dick Portillo, right, to purchase and run the namesake company Portillo started with a small Villa Park hot dog stand.

      Mike Miles, left, of Berkshire Partners, a private equity firm in Boston, was chosen by Dick Portillo, right, to purchase and run the namesake company Portillo started with a small Villa Park hot dog stand. Daniel White | Staff Photographer

  • Dick Portillo opened The Dog House in 1963 in Villa Park. It grew into the Portillo's restaurant chain.

    Dick Portillo opened The Dog House in 1963 in Villa Park. It grew into the Portillo's restaurant chain. COURTESY OF PORTILLO RESTAURANT GROUP

  • Dick Portillo, right, served with the First Marine Division at Camp Pendleton, California.

    Dick Portillo, right, served with the First Marine Division at Camp Pendleton, California. COURTESY OF Dick PORTILLO

  • Collages of Portillo's mementos line the office of Dick Portillo, former owner of the restaurant group.

      Collages of Portillo's mementos line the office of Dick Portillo, former owner of the restaurant group. Daniel White | Staff Photographer

Dick Portillo was facing a lonely Thanksgiving as a U.S. Marine in 1957.

At 17, the Chicagoan had gone through boot camp, learned to march and slept in a Quonset hut in California. Other new recruits had already left with invitations from the officers to enjoy a holiday meal. But young Portillo was somehow forgotten and was about to go to the mess hall.

Then 1st Lt. Barney Brause walked in and ordered Portillo to come with him. Brause took Portillo to his home to meet his family and enjoy a home-cooked meal. "They treated me like a rock star," Portillo said.

The memory of that holiday meal and the officer's kindness stayed with Portillo for years. The experience influenced how Portillo treated his own employees, used a Marine's discipline to pursue his dream and, ultimately, built the Portillo Restaurant Group, headquartered in Oak Brook.

"I learned a lot from him on how to treat people," Portillo said of Brause. "He was a tough son-of-a-gun, but he still treated people well. I watched him a lot after that and saw how he spent a lot of time in training. But if you screwed up, you were in big trouble. Yet, his company would jump off a roof for this man."

That's how Portillo wanted to lead his business, which he sold last year for reportedly $1 billion to Boston-based Berkshire Partners. The company has been renamed Portillo's Hot Dogs LLC and has 39 locations, including nine Barnelli's restaurants, in Illinois, Indiana, California, Arizona and, soon, Florida.

Dick Portillo now has an office in Oakbrook Terrace where he manages his own real estate investments, including the land under many Portillo's, Barnelli's, Honey-Jam Cafe and Luigi's restaurants. He leases the land back to the new owners of those brand names.

He also has invested in the RPM Restaurant opening later this year in Washington, D.C., several apartment buildings, and shopping centers in Bolingbrook, Oswego, Elgin and Indianapolis.

All of this has helped to make a comfortable life for himself, his wife, Sharon, and their three sons, Michael, Joseph and Tony. He has a home in Oak Brook and another in Naples, Florida. He has a Westport yacht that he takes on long excursions to trace historical routes, including those of Christopher Columbus. At 75, Portillo wants to spend more time with his family and see his namesake restaurant chain expand to all 50 states. He didn't have the resources to do that expansion, and instead, passed the dream onto Berkshire Partners, which is unaffiliated with Warren Buffett's Berkshire Hathaway.

"We had to know enough about the restaurant business to know how incredibly important this is," said Michael A. Miles Jr., Berkshire Partners advisory director.

Berkshire Partners has ramped up the expansion slowly, "so it doesn't threaten the quality, delivery and the service," Miles said.

Portillo's restaurants recently opened in Rockford and Homewood, while others are planned for Tampa, Florida, and Gurnee this year. Five more are set for next year.

​"This has been a very emotional thing for me," Portillo said of the sale.

Portillo said he received numerous calls from potential buyers over the years. But he felt many just wanted the name, or would change the business radically, or even expand it too quickly. He didn't build the business for more than 50 years to have someone ruin it.

"I had to decide who would take care of my baby," Portillo said.

Blue-collar roots

Dick Portillo was born and raised in Chicago, first living on West Van Buren and then at a row house on Mohawk Street at the Mother Cabrini Housing Project, later called Cabrini-Green Homes. His father, Frank, worked for the railroad, sold insurance and later gave driver's license tests. His mother, Bea, was a stay-at-home mom, then worked in an office. Dick's brother, also named Frank, was president of Brown's Chicken & Pasta Inc., which was not associated with Portillo Restaurant Group. Their sister, Carmen, has died.

As a strong young man, Portillo did mostly blue-collar jobs -- drove a truck, factory work, whatever he could find. He married his high-school sweetheart, Sharon, and they moved to Villa Park.

He looked around the suburb and felt it had a lot of nice homes, but there were no places to buy a hot dog.

"I couldn't figure out why there wasn't a good, quick place to get a hot dog," Portillo said.

He also knew he couldn't do manual labor forever, and with a family, he wanted to settle into a good job for the long haul. That's when he came up with a plan to open his own hot dog stand.

There was a problem: Portillo didn't know how to cook. But that didn't stop him.

At first, his wife "hit the ceiling." She wanted their $1,100 savings used as a down payment on a house, not a hot dog stand. She was so upset, she went to her mother and told her about Portillo's plan.

"Her mother said, 'Sit down. He's working his behind off. At least he has ambition. You should back him up,'" Portillo recalled.

Sharon followed the advice and the couple never looked back.

In 1963, Portillo set up a small trailer, called The Dog House, on North Avenue in Villa Park. It didn't have running water, so he ran a garden hose from another building. He bought his hot dogs and condiments from the local National Tea grocery store. But the customers weren't flocking to his window. He was failing.

While Sharon worked to keep the business going, Dick took their two young children to visit other local hot dog stands and restaurants. He wanted to know where they bought their hot dogs, how they steamed their buns and, most of all, how they lured back customers.

At one restaurant, Portillo purposely walked into the "employees only" door and saw cases of products with distributor names. He quickly jotted down those names before a worker noticed he didn't belong there. Portillo jokingly said he was looking for the bathroom and left.

"That's how I learned," he said. "Everything I did was because I learned about it from somewhere else."

He went to another restaurant and leaned over the counter to see how they steamed their buns or asked how hot the water had to be.

"That's how bad I was, I would try to steam the buns and they would become hard as rocks," Portillo said.

Learning curve

While he admits a fear and panic of losing everything could have stopped him cold, he kept going. He wanted to learn more. He walked into more restaurant storage rooms and jotted notes with a pen and paper until someone discovered him or told him to "jump in the lake" when he asked questions, he said.

His hot dog stand "started to grow, and the more knowledge that we got, the better it became," Portillo said.

He was so eager to please people, he sometimes sacrificed his own health. One day he became so sick with the flu that he passed out in the trailer. A concerned customer leaned in and thought Portillo had been robbed and was dead on the floor.

Another time, he ran to a customer's car to get an order -- two hot dogs, two fries and two root beers. The customer gave him $20 and needed change. But Dick tripped, fell and everything scattered. He quickly got up and got the change for the customer. When he returned to the trailer, he realized his knees were badly cut.

Still, he didn't close. He didn't go to the emergency room. He kept working. Running out to that car actually led him to create his first drive-through.

"I just wanted to please people so bad," he said.

As his confidence grew, so did his business. He started thinking about opening three or four more places. But he was managing everything by himself and needed to hire some supervisors. That's when he started to build the organization.

"I spent an enormous amount of time training them and the more I did that, the easier it got," he said.

Expansion, payback

As he expanded the Portillo's brand, he created Barnelli's and Luigi's, and Key Wester in Naperville. But with expansion came some hard lessons. Key Wester was built in 1996 on a concept Portillo developed from his travels through Key West, Florida. But Key Wester was physically too big and overhead costs ballooned. Fish became too expensive. So he closed Key Wester in 2011.

But it didn't stop his dream to continue building the company.

At his new California Portillo's restaurant, a Marine officer asked Portillo to provide a discount for meals served to those from the Wounded Warrior Battalion at Camp Pendleton. Portillo said instead of a discount, he would provide them with free meals -- with a string attached.

Portillo, a former Marine lance corporal, wanted to see his old barracks. Arrangements were made and a sergeant accompanied Portillo to his former barracks. But a security guard stopped them. They were told it was a restricted area and Portillo needed special clearance. After the men talked further, the guard went inside. When Portillo was escorted in, all the Marines stood and snapped to attention.

Surprised, Portillo told them, "At ease."

About five years ago, Portillo wondered what became of 1st Lt. Barney Brause, who was so kind to him during that first holiday meal away from home about 50 years ago.

Portillo and a staffer tracked down Brause and learned he served two tours of Vietnam, retired as a full colonel and lived with his wife in California. Portillo got in touch with Brause and offered the retired officer and his wife an all-paid trip to the Solomon Islands. They met in Fiji and Portillo escorted them on a private boat with a crew.

"When someone is kind to you, it sticks in your mind," Portillo said. "You learn certain things in life, and I learned a lot from him."

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